Paying borrow fees on shorted shares
Posted by Frugal on July 21st, 2009
InteractiveBroker is just going nuts on charging 3% to 8% on borrowing shares. Such borrowing rate is just ridiculuous. As far as I understand, all of my shares in my margin account can be lent out for the benefit of Interactive Broker. They don’t pass those borrow fees to me, but they are charging me borrow fee for the shares that I have shorted. Even shorting widely available stock ETF shares, there is a borrowing fee of some 3%. Yeah, they used to pay some interest money on the cash proceed from shorts (only if the total amount from shorting is more than $100,000). But now their interest rate is absolute zero (worse than many online brokerage firms which are non-zero), and obviously can’t possibly compensate for any borrowing fee.
I have checked with TD Ameritrade, FirstTrade, Scottrade. None of them will charge any borrow fees for short positions. I guess I’m going to have to close out my shorts, or transfer those short positions out right away.
If anyone knows a good brokerage firm for option trading, please add it to the comments. I have been browsing TradeKing, Zecco, and SogoTrade. Still not sure which one to use yet. If you have any experiences with those mentioned, please let me know. Thanks in advance.
More related posts:
Digg it Del.icio.us Reddit Furl BlinkList Newsvine Yahoo MyWeb
July 21st, 2009 at 11:05 am
Go with thinkorswim – I guarantee you won’t be disappointed. Cheap option trades (cheap stock trades too), incredibly useful tools for analysis, buy backs for short options a nickel or less is free. Customer service is best I’ve ever seen, for any company. Their platform is truly amazing. And you can even earn $50 (and I can earn $50) for referring you, if you want to e-mail me your e-mail and let me know after you’ve signed up with them. Think of it as a finder’s fee.
July 25th, 2009 at 10:31 am
Borrowing fees are the best for online brokers to make money. Expect a debit to hit your account not immediately, but definitely within 7 days of when you covered.
I hope you haven’t been to short in this rip upwards.
Rgds,
RB
Retire By 30, Retire By 40
August 1st, 2009 at 10:50 am
To Craig:
Ever read your own FAQ’s?
https://www.thinkorswim.com/tos/displayFaq.tos;jsessionid=5D156296D055F0FC51247EE0607690AB.v21?searchCriteria=stock+borrow&categoryKey=All
in order to short a stock at thinkorswim, our clearing firm has to borrow it from someone i.e. another clearing firm who holds a long position to deliver to the buyer on the other side of your short sale. If you wish to short a stock that is in short supply because of volatility, small float, etc. there is an additional charge depending upon demand for that particular stock. thinkorswim, Inc. passes that Stock Borrow fee along to you from our clearing firm. This rate will vary based upon market rate to borrow the security requested. Again, this fee is passed on to you from our clearing firm. Sorry.
This is the result of the SEC coming down hard on those that shorted without covering. The SEC is doing its job and if you think the company is going down then why not pay the 3%?
Oh yeah, now is the wrong time to short!
August 1st, 2009 at 10:58 am
BTW the short fee is with ALL brokerages… It is new and you will have to pay it.
http://forumserver.twoplustwo.com/30/business-finance-investing/can-anyone-explain-about-hard-borrow-fees-zecco-530067/
Rowela : Shorting stock requires Zecco Trading’s clearing firm to borrow the stock from the holder of a long position willing to deliver to the buyer on the other side of your short sale. If you wish to short a stock that is in limited availability to borrow, there is an added fee with an amount depending on the availability for borrowing the stock upon settlement date of your trade. Zecco Trading passes that Hard to Borrow fee along to you from our clearing firm. This rate will be based on a variety of factors based on this demand and prevailing market rates.
May 23rd, 2010 at 10:11 am
Stocks and Shares ISA